Among the improvements over last year's model: The camera now has auto-focusing, whereas the older model had a fixed-focus lens that didn't compensate for how far away the subject was. The new Moto E will also have a front-facing camera for selfies, though images won't be as sharp as the 5 megapixels on the rear. There's also a model with 4G cellular connectivity. Last year's model was available only for slower, 3G networks.

In the US, Motorola will target prepaid customers, as well as those looking to buy children their first smartphones.

The 4G model will cost USD 150 in the US, while the 3G will go for USD 120, both without contract requirements. The screen measures 4.5 inches diagonally, slightly larger than before.

Motorola, which Lenovo Group bought from Google Inc in October, has been trying to set itself apart from other phone makers by selling cheaper phones that have some features found in higher-end products. For instance, all of its phones use Corning's Gorilla Glass for durability.

"Even in developed markets, a large percentage of the population isn't on a smartphone," Rick Osterloh, Motorola's CEO, said in an interview. "This category represents the biggest growth area."

Motorola, which is headquartered in Chicago, announced its new phone today ahead of next week's Mobile World Congress in Barcelona, Spain. Samsung, HTC and others are expected to unveil their spring lineups at the show. Sony also announced a budget phone this week for 129 euros (USD 146), though there's no plan to sell it in the US. LG announced four mid-range smartphones. Details on prices and US availability weren't immediately revealed.